Northern Ireland narrowly avoided losing its transatlantic flight because of aviation tax, the Secretary of State has said.

Owen Paterson was speaking after it was confirmed by Government that air passenger duty (APD) will be cut for direct long-haul routes from November 1.

Yesterday Chancellor George Osborne announced the current rate will fall to the lower short-haul bracket — £12 per passenger in economy and £24 for business and first class passengers, down from £60 and £120 respectively.

Had this not happened, Continental Airlines was poised to pull its daily route from Belfast to New York (Newark), as this newspaper revealed in February.

In an interview with the Belfast Telegraph at Hillsborough Castle yesterday, Mr Paterson said he would have considered losing the service “a personal failure”.

“It is a huge relief to have resolved the APD issue because we put an enormous amount of effort into this,” Mr Paterson said.

The airline — which was set to pull out of Belfast early next year — recently told MPs the route would cost it £3.2m this year, rendering it no longer viable.

“Continental made it quite clear that when there’s a levy of £60 per economy passenger in Northern Ireland and €3 (£2.60) in Dublin, that was an unbridgeable difference unless something radical happened,” Mr Paterson said.

Mr Osborne’s visit to the province in June was deemed as

being pivotal in providing the impetus needed to save the day.

“We all understood just how vital it was to keep a daily link with the USA for successfully expanding businesses in Northern Ireland,” said Mr Paterson.

The Secretary of State denied that resolving APD was a soft soap because Northern Ireland isn’t getting a reduction in corporation tax.

“What it shows is that the UK Government is determined to help rebalance the NI economy, and working with Executive ministers, where there is a problem, is prepared to do something radical,” he said.

The Government will launch a parallel process to devolve aspects of APD to the Assembly, while the precise scope will be agreed with the Northern Ireland Executive.

Deal on duty 'will see others demand equality'

George Osborne’s decision to cut air passenger duty in Northern Ireland will “open the floodgates” to claims from other regions, travel bosses have warned.

The Chancellor’s intervention to save the province’s cherished US airline route was raised last night during a fringe debate at the Labour Party conference in Liverpool.

Luke Pollard, of the Association of British Travel Agents, said yesterday’s decision to cut the levy and devolve its control to Stormont was the result of sustained pressure from the Northern Irish business community.

But it would create a “real challenge” for Mr Osborne in responding to similar demands from other areas, he said.

He added: “This is only a small concession, but it speaks volumes about the impact that APD has. It is a problem with the location of other parts of the United Kingdom as well.

“It has effectively opened the floodgates for other areas to show it is having a negative impact on the economy.”

Nial Duffy, the head of public affairs at Flybe, said airlines would be “knocking down the door” of Number 11 Downing Street.

He said the Chancellor’s intervention had been “a poor decision in terms of his inbox”.